The author is a Forbes contributor. The opinions expressed are those of the writer.

Loading ...

Loading ...

This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe

Disclosure: I own shares of Nasdaq.

I keep buying stock in Nasdaq. That’s not a stock on Nasdaq, that’s Nasdaq itself. The ticker is NDAQ. It is one of those stocks I have to keep taking a second look at because it simply seems to be at the wrong price. In this case, too low a price.

It’s old fashioned but I like cheap stocks.

People will tell you they are cheap for a reason, even if they don’t know the reason. They tell you cheap stocks get cheaper and you should steer clear. They will often have a stab at inventing some reasons why a stock is cheap.

The Nasdaq blew up the Facebook IPO, didn’t they? Well, there you go, that’s why Nasdaq is cheap. (NB: As someone who has a few servers handling stock market data, I was hardly surprised when it happened. Stock market feeds never implode when the market is quiet. They tend to crash at the most busy moment possible for obvious reasons.)

Six billion dollars is just the wrong market cap for Nasdaq, which is, after all, a pillar of the American economy. You can buy Nasdaq three times over for Whatsapp.

WTF Twitter = 4 $Ndaq FFS @forbes #valueinvestment

A 16 P/E is hardly high in general, when the ICE/Nasdaq combo is at 58 and CME is at 24.

The venerable London Stock Exchange just bought the Russell 2000’s parent Frank Russell Company and it too has a 24 P/E so even playing catch up the Nasdaq looks to have a 50% uplift. The LSE is at 5 times sales, the CME nearly 8 and the ICE twelve. Meanwhile the Nasdaq’s is 2.

Facebook is at 25 times sales.

I think I need to buy more Nasdaq!

Meanwhile, the buzz in the industry is “Fintech.” You don’t need to be a “Flash Boy” villain or hero to know where that is coming from.

Flash Boys by Michael Lewis is great news for exchanges everywhere. The misnomic confusion around “high frequency trading” has everyone in a lather. The choices for participants is, you man up and grab the trading equivalent of a BFG and get busy with your “Fintech” or you wimp out and demand to go forwards to the past and slow the whole game down or make it more like the good old days.

The first is where “Fintech” comes in. If you want to enter the arms race of high speed algo trading you need a lot of tech. The possibilities are never ending, as is the potential expense and profits to be had.

If the industry goes forward to the past, then the exchanges will prosper massively as trading is driven back to central points where the watchdogs will find it comfortable and easy to watch the goings on. It is hard to be a sheriff when the gun slingers are all over the map. The way forward is to round them up.

The likely outcome of this new dynamic is a mix of the two strategies. There will be regulatory pressure to reconsolidate markets from the current fragmented landscape, coupled with a tooling up of more participants to compete at the accelerating pace of trading technology.